Greenspan, Rubin and Summers: The Committee That Saved or Screwed The World?

Since the beginning of the 2008 financial crisis, citizens of the developed world have started to recognise words such as “austerity” and “budget cuts” for their harmful social and economic consequences. In the developing world, however, these terms have been very well know and (un)popular for a very long time.

After the abandonment of the Bretton Wood System of fixed exchange rates and regulations (created by Keynes to prevent financial meltdowns) and the beginning of a financial liberalization era in the 70s and 80s, developing countries have become increasingly more exposed to stock crashes, economic recessions, banking suspensions and banking failures.[1]In the post-war, there have been no banking crises anywhere in the world. Between 1973 and 1997, however, developing countries experienced 17 banking crises, 57 currency crises and 21 “twin” crises.[2] In the years following, crises continued to strike all over middle-income economies, especially in Latin America and Eastern Europe.

As long as they affected developing countries and transitional economies, however, free market economists and media pundits could easily point their fingers at the inefficiency and corruption of national governments, instead of blaming the rise of financial volatility, speculation and deregulation of the global economic system.

“It is easy to draw up a checklist of what went wrong,” wrote the editors of “The Economist” in explaining the sequel of financial downturns in Mexico, Thailand, South Korea, Indonesia and Russia. “Financial systems in many emerging markets were weak, badly supervised, and inadequately regulated and exchange rate regimes were inappropriate,” they wrote. “All hit trouble because their firms, banks or governments borrowed too much short-term money.”[3]

In a unique showcase of cynicism, Thomas Friedman remarked: “I believe globalization did us all a favor by melting down the economies of Thailand, Korea, Malaysia, Indonesia, Mexico, Russia and Brazil in the 1990s, because it laid bare a lot of rotten practices.” [4]

When, at last, in 2008, the “financial clockwork orange” hit like a boomerang the very countries that designed it (the US and the UK), these delusional allegations could no longer be sustained with a straight face. The inefficiencies and corruption of developing countries’ governments could no longer be used as scapegoats. It became clear instead that there was something rotten at the very heart of the global financial empire. But many of the same media outlets that now pontificate about the immorality of greed, and question “austerity” and “budget cuts” in Europe and in the US, were completely at ease with these policies when they were applied to crisis-stricken poor nations.

In 2000, “Time Magazine” featured three of the major champions of the global deregulation crusade – US Treasury Secretary Robert Rubin, Deputy Treasury Secretary Larry Summers and Federal Reserve Chair Alan Greenspan – as “The Committee To Save The World,”[5] for their supposedly beneficial role in “saving” developing countries hit by a crisis through structural adjustment policies and liberalisation.

Now, of course, the climate is very different and even the high priests of the neoliberal market church are finally judged for who they are: a bunch of ideologues whose record of economic disasters include not only the crises in the developing world, but also the Great Recession and the global financial instability in which we live today.

In a unique moment of repentance, Time Magazine recently featured one of the “three marketeers” that “save(d) the world”, Greenspan, among the “25 People To Blame for the Financial Crisis.” [6] Should not we ask Time Magazine to re-feature Greenspan, Rubin and Summers as ” The Committee That Screwed The World”?